Investing in NEO: What to consider
Created by the Chinese company Onchain, NEO was the first cryptocurrency to be launched in China. It is similar to Ethereum in that it was developed to enable the creation of various blockchain applications, and not just as a cryptocurrency. However, the way how NEO works differs from Ethereum and other cryptocurrencies in many ways. Most prominent is the fact that it is not decentralized and cannot fork. The creator of NEO, Da Hongfei, built it to be able to comply with Chinese regulations and coded it in such a way that enables the entire network to be changed or upgraded at once, without the need for user consensus. Looking at the NEO chart, it is apparent that its strong infrastructure and growing number of partners in China has made it a top 10 cryptocurrency, boasting a market cap in the billions.
Who should include NEO in their portfolios?
Cryptocurrency traders: Since it is one of the largest cryptos in the world, traders who invest in cryptocurrencies could buy NEO as part of a well-balanced portfolio.
Ethereum traders: Those who believe in the real-world applications of blockchain technology, namely Ethereum, should also look into investing in NEO due to the similarity between the two blockchain platforms.
Bitcoin investors: NEO was designed to work with, not against, Chinese regulations. Since China is one of the countries more heavily regulating cryptocurrencies, and has cracked down on Bitcoin in the past, NEO could be used as a hedging tool for Bitcoin traders.
Day traders: Like all cryptocurrencies, the price of a single NEO coin could shift dramatically over a short period of time. Therefore, it is often used by traders who wish to turn a profit over the course of a single day.
What drives NEO’s price?
Like many cryptos, NEO had a breakout year in 2017, rising thousands of percents and positioning itself as one of the world’s largest cryptocurrencies by market cap. Since it is not decentralized and cannot be divided (the smallest unit of the currency is one NEO), it has more stability and is designed to experience less latency. However, like all digital assets, it is exposed to various factors that could generate volatility. Among these factors are:
Hard-capped supply: The entire supply of NEO tokens is limited to 100,000,000. After all of the tokens enter circulation, there will be no more new tokens mined or introduced. Therefore, if demand increases, the limited supply could contribute to rising prices.
Bitcoin: For better or worse, Bitcoin is still considered the bellwether of the cryptocurrency market, and can often influence the majority of the market. If Bitcoin is on a bull run, other cryptos often follow suit, and if it turns bearish, it could drag other cryptos, including NEO, down with it.
The Chinese government: In late 2017 and early 2018, the Chinese government began to crack down on cryptocurrency exchanges. Back then, roughly 75% of all Bitcoin trading was done in China, so China’s declared and rumored intents to heavily regulate Bitcoin trading was one of the factors BTC prices were dropping. However, since NEO was designed to comply with Chinese regulations, it could actually benefit if the Chinese government continues to impose sanctions on other cryptos.
Non-financial applications: The NEO blockchain platform could be used for creating a myriad of applications, such as identity-theft prevention, supply chain monitoring and many others. Since these applications by default use the NEO token as their in app currency, further development of this aspect of the platform could contribute to the token’s demand.
NEO: The Chinese connection
During times of uncertainty in the cryptocurrency market in Asia, NEO could have the upper hand. A significant part of the unprecedented crypto bull run in 2017 was fueled by Chinese and South Korean traders. However, the governments of these respective countries were unhappy with the unregulated market and took some extreme measures to curb its expansion. This resulted in panic in the crypto market and hundreds of billions of dollars were wiped off the market in late 2017.
However, during the same time, NEO began rising through the ranks, reaching a market cap in the billions and positioned itself as a prominent cryptocurrency. This could be attributed to the fact that it is Chinese government-friendly by design. It is no secret that China favors companies that comply with its regulations, which is why so many local companies, such as WeChat and Alibaba succeeded where their foreign counterparts, such as Facebook and Amazon, failed.
History of NEO
Onchain was founded in 2014 by Da Hongfei, and originally launched the NEO platform under the name AntShares. It was designed to enable the creation of blockchain applications and smart contracts, and its network can process up to 10,000 transactions per second. It was modeled similarly to Ethereum, although its management system is more centralized and it cannot fork. So what is the NEO cryptocurrency? While not completely decentralised, NEO holders can still vote on various issues regarding the platform. Each NEO token is representative of one share, or vote, in the market (similar to shares in a company), which is why the token cannot be divided.
Alongside the NEO token, Onchain released another token called NeoGas (or GAS). While NEO is the management token, giving its holders voting rights, GAS is the operational token, used for running the NeoContract system. NEO holders receive a small daily dividend in GAS.
Fifty percent of the 100,000,000 NEO tokens were pre mined by its founders and used to pay programmers and other suppliers, while the rest were gradually introduced into the system. In 2017, in the heat of the crypto bull run, NEO skyrocketed some 10,000% and became a multi-billion, top 10 cryptocurrency.
Conclusion: NEO could be China’s star
The NEO token benefitted twice in 2017: once when joining the rest of the altcoin market as part of the crypto bull run, and then again by not being targeted by the Chinese government. If the Chinese crackdown on cryptocurrencies continues, while NEO continues to strike strategic partnerships in the country and continues to comply with regulations, the cryptocurrency could only benefit. Not only will it be allowed to operate freely where some of its counterparts have been restricted, it could also receive support from the government, since China often assists and encourages local businesses that fit its economic policies.
*This content is for information and educational purposes only and should not be considered investment advice or an investment recommendation.
*Cryptocurrencies can fluctuate widely in prices and are, therefore, not appropriate for all investors. Trading cryptocurrencies is not supervised by any EU regulatory framework. Past performance is not an indication of future results. Your capital is at risk.